GREEN INNOVATIONS : Files SEC form 10-K, Annual Report

Summary of GREEN INNOVATIONS LTD. - Yahoo! Finance

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. This report on Form 10-K contains forward-looking statements within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended, that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. Words such as "anticipate," "expects," "intends," "plans," "believes," "seeks" and "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-K. Investors should carefully consider all of such risks before making an investment decision with respect to the Company's stock. The following discussion and analysis should be read in conjunction with our consolidated financial statements and summary of selected financial data for Green Innovations Ltd. Such discussion represents only the best present assessment from our Management. 35
DESCRIPTION OF COMPANY: The Company was a startup company that was incorporated in Nevada under the name Winecom, Inc. on July 1, 2008. The stockholders of the Company on August 15, 2012, approved a forward split of one share of common stock for twenty shares of common stock. On August 15, 2012, the Company filed with the State of Nevada for a name change to Green Innovations Ltd. ("Green Innovations"). On September 20, 2012, the Company filed with FINRA for its name change and a symbol change. On September 28, 2012, FINRA notified the Company of its symbol change from WNCM.OB to WNCMD.OB for thirty days, effective October 1, 2012, and then the subsequent change to GNIN.OB, to be traded on the NASDAQ OTC Bulletin Board. The Florida-based company is an importer and wholesaler of bamboo-based hygienic products through a licensing agreement for proprietary products. On September 26, 2012, the Company acquired Green Hygienics, Inc., a Florida corporation, as noted in Form 8-K dated September 26, 2012. The officer and director of the acquired company was the sole officer and a director of the Company at the time of the acquisition. The Company has two wholly-owned subsidiaries; Green Hygienics, Inc. ("Green Hygienics"), a Florida corporation, and Sensational Brands, Inc. ("Sensational Brands"), a Florida corporation, which was dissolved in September 2013. The following Management Discussion and Analysis should be read in conjunction with the consolidated financial statements and accompanying notes included in this Form 10-K. COMPARISON OF THE YEAR ENDED DECEMBER 31, 2014 TO THE YEAR ENDED DECEMBER 31,
2013 Results of Operations Revenue. For the year ended December 31, 2014, our revenue was $4,159,562, compared to $1,867,788 for the same period in 2013. This increase in revenue was primarily attributable to increased sales related to the beginning of operations in the fourth quarter of 2013. Operating Expenses: Direct costs of Revenue. For the year ended December 31, 2014, direct costs of revenue were $3,155,448 compared to $1,725,243 for the same period in 2013. As a percent of revenue, direct costs of revenue were 75.9% and 92.4%, respectively, for 2014 and 2013. The percent for 2014 was lower than 2013 as the Company, in 2013, liquidated, at a loss, outdated inventory to accommodate the new branding of the Company. General and Administrative Expenses. For the year ended December 31, 2014, general and administrative expenses were $3,777,621 ($914,514 related to stock-based compensation) compared to $4,526,261 ($2,463,993 related to stock-based compensation) for the same period in 2013. The general and administrative expenses without stock-based compensation was $2,240,934 and $2,062,268, respectively, for 2014 and 2013. Net Loss. We generated net losses of $7,796,339 ($914,514 related to stock-based compensation and $2,893,702 for amortization of debt discounts, beneficial conversion features, and other non-cash losses) for the year ended December 31, 2014, compared to $8,351,175 ($2,463,993 related to stock-based compensation and $3,265,221 for amortization of debt discounts, beneficial conversion features, and other non-cash losses) for the same period in 2013. 36
Liquidity and Capital Resources General. At December 31, 2014, we had cash and cash equivalents of $49,157. We have historically met our cash needs through a combination of cash flows from operating activities and proceeds from private placements of our securities and loans. Our cash requirements are generally for selling, general and administrative activities. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements, and partial repayment of debt through the next 12 months. Our operating activities used cash of $1,358,934 for the year ended December 31, 2014, and we used cash in operations of $4,424,637 during the same period in 2013. The principal elements of cash flow from operations for the year ended December 31, 2014, included a net loss of $7,796,339, offset by stock-based compensation and settlements of $914,514, amortization of debt discounts of $94,370, amortization of beneficial conversion features to interest expense of $1,514,711, change in derivatives of $678,650 loss on issuance of stock of $433,359, offset by gain on sale of investment of $321,455. Cash provided by investing activities during the year ended December 31, 2014, was $0 compared to $0 during the same period in 2013. Cash generated in our financing activities was $1,369,790 for the year ended December 31, 2014, compared to cash generated of $4,417,198 during the comparable period in 2013. This decrease was primarily attributed to a concentrated effort of capital procurement in 2013. As of December 31, 2014, current liabilities exceeded current assets by 5.2 times. Current assets decreased from $2,570,473 at December 31, 2013 to $1,284,948 at December 31, 2014, whereas current liabilities increased from $2,385,988 at December 31, 2013, to $6,674,269 at December 31, 2014.

For the years ended December 31, 2014 2013 Cash used in operating activities $ (1,358,938 ) $ (4,424,637 ) Cash provided by investing activities - - Cash provided by financing activities 1,369,790 4,417,198 Net changes to cash $ 10,852 $ (7,438 )

Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had sales of $4,159,562 and net losses of $7,796,339 ($914,514 represents stock-based compensation and settlements) for the year ended December 31, 2014, compared to sales of $1,867,788 and net losses of $8,351,175 for the year ended December 31, 2013. The Company had a working capital deficit, stockholders' deficit, and accumulated deficit of $5,389,321, $10,117,176 and $17,336,999, respectively, at December 31, 2014. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to continue to obtain investment capital from future funding opportunities to fund the current and planned operating levels. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts. 37
Critical Accounting Policies Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying consolidated financial statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrant and beneficial conversion feature debt discounts, valuation of share-based payments and the valuation allowance on deferred tax assets. Changes in Accounting Principles. No significant changes in accounting principles were adopted during fiscal 2014 and 2013. Derivatives. The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date. Impairment of Long-Lived Assets. The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair Value of Financial Instruments and Fair Value Measurements. The Company measures their financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses escrow liability and short-term loans the carrying amounts approximate fair value due to their short maturities. We have adopted accounting guidance for financial and non-financial assets and liabilities. The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: 38
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. Revenue Recognition. Revenues are recognized on our products in accordance with ASC 605-10, "Revenue Recognition in Financial Statement." Under these guidelines, revenue is recognized on sales transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of service has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has several revenue streams as follows: · Delivery of product to a merchant. Stock-Based Compensation. The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.

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